Porto Alegre, June 20, 2023 – Brazil is advancing the harvest of its biggest corn second crop, still having a large sorghum crop to be reaped. With almost 40% of the soybean crop still in warehouses and a very high flow of shipments at ports, corn is trying to find space for a healthy flow amid the complicated Brazilian logistics. The CBOT highs last week collaborated in some price highs in Brazilian ports, however, they were neutralized by the strong appreciation of the real. The external moment is determined by the weather and not yet by a significant crop failure, which leads us to assess that the environment is of expansion of selling opportunities in Brazil.
A tense picture on the CBOT with a classic “weather market” movement this June. We commented in our last issues that the CBOT was oversold with corn, perhaps conditioned by the record production number estimated by USDA. But we still have the weather and this oversold position could convert into rallies in case of weather surprises. And this movement has emerged in the last few days, with many positions being dismantled and even reverting the action to purchases. This action/reversal flow really causes this type of acceleration in prices and is often more conditioned by this movement than by effective production losses. Just like the situation of little rain in the last thirty days has sparked this kind of price rallies, the resumption of a more regular situation until the beginning of July could quickly reverse this upward movement. It is this kind of caution that the Brazilian market will need for the next few days, and it seems quite wrong to consider a crop failure before it turns out to be a reality.
The Brazilian market advances in the harvest of its biggest second crop in history. With no frosts in the most critical regions of Paraná, Mato Grosso do Sul, and Paraguay, production begins to consolidate and with an evident profile of great supply in the second half. These second-crop regions have very late corn trading this year, precisely because of late planting and the risk of frost. Besides, they have a very delayed commercialization of soybeans, mainly in Paraná. This tends to be an aggravating factor for the reception of this excellent second crop that will start to be reaped at the end of this month.
The external highs last week helped Paraná and Mato Grosso do Sul to slightly improve export sales. Prices were at BRL 54/55 on the railroad in Paraná and from BRL 64 to 66 at the ports of Paranaguá, São Francisco, and Imbituba for July/August/September shipments. There is another cold front arriving in the South region at the turn of the month, perhaps without risk to crops and that could speed up selling actions, either for the domestic market or exports.
In Mato Grosso, the harvest is progressing with high productivity and good initial flow. The soybean crop is 70% sold in the state and mitigates the difficulty in the corn arrival and outflow. The high flow of initial shipments of corn at the port of Santarém is also surprising, with almost 450 thousand tons scheduled in June, as this port generally still has a strong accumulation of soybean shipments in this period. In any case, it is just the beginning of a strong harvest that will require a strong flow. In the state, prices remained between BRL 35 and 40 a bag for July/August shipments. Better prices only with shipments after September.
Goiás begins the harvest in the southwest of the state and has several locations ready for a stronger advance at the turn of the month, depending only on corn moisture. There is also a strong sorghum crop that extends across the southeast of the state, Minas Gerais, and Bahia, whose harvest will begin in July, with natural pressure from internal sales. The week’s price improvement was discreet. Over-the-counter and trading companies’ prices improved to BRL 40/42 with July/August shipments. Sorghum is pegged at BRL 33 CIF in Rio Verde and BRL 36/38 in Triangulo Mineiro.
Minas Gerais was practically the only market that registered any real increase in prices supported by its local market. The market reached BRL 45/46 in May in the Triangulo Mineiro region. Last week, business occurred at BRL 50 both for domestic demand and exports. The local second crop is a little later than the other states, and the harvest should take place from the second half of July onward.
São Paulo has a pending situation for the arrival of the corn second crop. A good part of consumers is positioned until July and already with lots to receive for the entry of the second crop, with corn from other states. In addition, Mato Grosso continues to offer and negotiate in the São Paulo market between BRL 56/59 CIF SP with ICMS, as it needs more immediate deliveries and payments, which exports do not offer. On the other hand, exporters started to indicate prices in the interior for July to September between BRL 53/54 against BRL 50/51 in the previous week. Now, with no second-crop harvests yet, sellers are trying to position themselves above BRL 54/55 FOB for physical lots. The connection with the port price will level the São Paulo market, considering that Santos has little space in the short term for large corn shipments due to the strong presence of soybeans, meal, and sugar. We may still have selling pressures below port levels due to this harvest liquidity.
In Rio Grande do Sul and Santa Catarina, despite the flow of business advancing through the ports of these two states, consumers calmly await the arrival of the second crop from Brazil and Paraguay. There is still a situation of need for flow and space in which exports may not be fully offered until August for neighboring states. Prices did not change much during the week, maintaining the levels of BRL 60/62 a bag.
Therefore, we notice that corn is adapting to the export scenario, there are and there will be some shipments in June and July, of course, but still far from being able to absorb all the incoming harvest. Last week’s good rain could prolong the harvest a little more and dilute the reception a little more. However, the large volumes of shipments will only occur after August, when soybeans free up more space in ports. For now, there are already 7 mln tons accumulated in the business year and effectively committed to exports. Each week, these volumes will grow until they reach the target of 47 mln tons or more if the international market allows for it.
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